Morning in New York: tariff policy in the spotlight

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

The implications of the February 20 US Supreme Court ruling on the illegality of import duties imposed under IEEPA (International Emergency Economic Powers Act, which allows the US President to declare a state of emergency due to an external threat and apply economic restrictions), including retaliatory decisions by the White House and attempts by companies to recover previously paid tariffs, will determine market dynamics in an unsaturated macro calendar. US President Donald Trump responded to the court verdict by announcing a global tariff of 10%, which was later raised to 15% under other trade powers. US authorities are expected to initiate a series of trade investigations into other legislation to restore an effective level of tariff protection. This complicates the situation and increases uncertainty, including on the issue of refund of previously paid duties. The situation is not expected to be resolved in the near future, as the Supreme Court has refrained from providing clarifications.

This Monday, February 23, will see the release of manufacturing orders data, the final estimate of Durable Goods Requests and Capital Orders for December 2025.

There will be a speech by Christopher Waller, a member of the Fed's Board of Governors, who is likely to explain why he voted for a rate cut at the December meeting and give an opinion on the future course of monetary policy.

The market continues to track the escalation of tensions in the Middle East, which is reflected in the largest build-up of US military infrastructure in the region since 2003 and White House signals of a strike to strengthen negotiating positions. The US is ready to hold a meeting with Iran in Geneva this Friday, February 27, if Tehran submits a detailed proposal on the nuclear program within 48 hours. According to media reports, Washington has dropped its demand for Tehran to completely halt uranium enrichment. Trump's entourage notes the lack of a unified position on the expediency of armed action against Iran and calls to focus on domestic issues. This situation supports interest in the energy and defense sectors, while creating a potential source of volatility for the broad market.

More than 85% of the companies in the S&P 500 index submitted their quarterly reports on February 23. Before the start of the main session , Domino's Pizza (DPZ), Dominion Energy (D), Axsome Therapeutics (AXSM), Freshpet (FRPT) and GeneDx (WGS) will publish their results. Hims & Hers Health (HIMS), ONEOK (OKE), Kratos Defense & Security (KTOS), Diamondback Energy (FANG), Keysight Technologies (KEYS), Ovintiv (OVV) and BWX Technologies (BWXT ) will report after the close.

Futures on American stock indices are declining under the influence of the above-mentioned factors. The balance of risks for the upcoming session is shifted to the negative side with increased volatility. Taking into account the increased general uncertainty, we forecast the continuation of correction.

- OpenAI plans to invest about $600 billion in computing capacity by 2030, while the company previously estimated its infrastructure spending commitments at about $1.4 trillion.

- Trump has called on Netflix (NFLX) to remove Susan Rice, who worked in President Barack Obama's administration, from its board of directors under threat of "repercussions". According to Bloomberg, the U.S. Justice Department is probing whether Netflix is using anticompetitive mechanisms in its content purchases and potential takeover of Warner Bros. Discovery (WBD) to monopolize the market. Sources say the agency is interested in Netflix's influence in negotiations with independent studios and producers. Netflix said the investigation is "routine in nature."

- Shares of Vanda Pharmaceuticals (VNDA) are up 35% in premarket trading on February 23, reacting to news of the U.S. Food and Drug Administration's (FDA) approval of an oral drug for schizophrenia and acute episodes of type I bipolar disorder. This sets the stage for a significant increase in sales forecasts, which was promptly built into the quotes.

- Bentley Systems (BSY) shares are rising 3.4% before the start of the main session on the background of data on a significant increase in Vanguard Group's stake in the company. The market interprets this activity of the largest institutional investor as confirmation of fundamental stability of business.

- Shares of paper packaging manufacturers Smurfit WestRock (SW: -7%), International Paper (IP: -5%) and Packaging Corporation of America (PKG: -7%) are under pressure due to forecasts of weakening demand in North America. An additional negative factor was a series of disclosed insider selling at Smurfit WestRock, which accelerated profit taking across the sector.

Trades on February 20 on American stock exchanges ended mostly on the positive territory. S&P 500 rose by 0.69%, Nasdaq 100 rose by 0.87%, Dow Jones added 0.47%, and only the Russell 2000 corrected by an insignificant 0.05%. The trading dynamics was determined by the Supreme Court's decision to recognize the import tariffs established last year by Donald Trump's administration as illegal, which outweighed the negativity from the mixed macro statistics.

Shares of the "Magnificent Seven" acted as a locomotive of the market. Quotes of Alphabet (GOOG) soared by 3.74%, securities of Amazon (AMZN) rose by 2.56%. The communications sector (XLC: +1.44%) was the leader of growth, while the energy sector (XLE: -0.54%) was the outsider.

Precious metals continued to rally, indicating continued strong demand for protective assets amid high tariff risks and geopolitical uncertainty.

Treasury bond yields rose at the long end of the curve amid inflation risks. Oil, despite talk about the preparation of a US strike on Iran, added only 0.1%, signaling doubts of the investment community in the implementation of plans for an immediate military invasion of the Islamic Republic.

The preliminary data of business activity indices (PMI) in manufacturing and services for February did not meet expectations, falling to seven-month lows. GDP growth for the fourth quarter, according to the first estimate, was equal to only 1.4% with the consensus at 1.9%. At the same time, inflationary pressure persists: the core price index of consumer spending for December increased by 0.4% m/m. Against this backdrop, Fed officials Laurie Logan and Raphael Bostic gave hawkish comments, admitting the possibility of a return to raising rates if inflation accelerates.

- CoreWeave (CRWV: -8.1% at the close of trading on Feb. 20) shares are falling amid media reports that Blue Owl (OWL: -6.7%) is having trouble raising about $4 billion in financing to build a data center in Pennsylvania, where CRWV serves as a key tenant.

- The CEO of Celsius Holdings (CELH: +9.5%) said the company has expanded the retail presence of its products and increased the share of energy drinks in total soft drink sales to 20% from 14% five years ago.

- Shares of Comfort Systems USA (FIX: +6.5%) set new local highs on the release of order book renewal data of nearly 100% year-over-year. The company exceeded operating profit forecasts by about 40%, citing accelerating organic growth and strong demand from the technology and healthcare sectors.

-Live Nation Entertainment (LYV: +3.3%) posted strong leading indicators, including increases in ticket sales and sponsorship contracts. The company's operating profit came in above consensus. Management said there were no signs of weakening consumer demand.

-AppLovin (APP: +1.6%), according to social media reports, is agreeing on a strategic partnership with OpenAI to monetize ChatGPT through advertising. In addition, media outlets are reporting that the company plans to launch its own social platform.

This article was AI-translated and verified by a human editor